UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
Commission File No. 0-25436
AAA NET REALTY FUND X, LTD.
(Exact name of registrant as specified in its charter)
Nebraska 76-0381949
(State or other jurisdiction of (I.R.S. Employer or Identification No.)
Incorporation or organization)
8 Greenway Plaza, Suite 824
Houston, Texas 77046
(Address of Principle Executive Offices) (Zip Code)
Registrant's telephone number, including area code (713) 850-1400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No_____
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
DOCUMENTS INCORPORATED BY REFERENCE
The Prospectus of Registrant dated September 17, 1992 (included in
Registration Statement No. 33-47638 of Registrant) and as
supplemented October 8, 1992, October 29, 1992, November 5, 1992,
January 28, 1993, June 15, 1993, September 15, 1993 and February
15, 1994 is incorporated by reference into Part III.
PART I
Item 1. Business
AAA Net Realty Fund X, Ltd. (the "Registrant" or the "Partnership")
is engaged in the business of acquiring, operating and holding real
properties for investment. The Partnership was organized to acquire
existing real estate income-producing properties as well as land
upon which such income-producing properties are to be constructed
("the Properties"), and to be leased to corporations. The
properties will not be leased to franchisees of such corporations
(unless a tenant corporation was to fail and in such event a
release may involve a franchisee lessee). American Asset Advisers
Management Corporation X (a Nebraska corporation) is the Managing
General Partner and H. Kerr Taylor is the Individual General
Partner.
Commencing September 17, 1992, the Registrant offered through
Securities America, Inc. up to 20,000 Units of limited partnership
interest (the "Units") at $1,000 per Unit with a minimum purchase
of 5 Units ($5,000) or 2 Units ($2,000) for an Individual
Retirement Account. At the termination of the offering on September
1, 1994 subscriptions had been received for 11,453.61 Units
($11,453,610). Limited partners are not required to make any
additional capital contributions.
The Units were registered under the Securities Act of 1933 on
Registration Statement No. 33-47638 (the "Registration Statement").
The Partnership acquired two properties in 1993, four properties
in 1994, one property in 1995 and one property in 1996. Six of the
properties were purchased directly and two through joint ventures
at a total price of $9,951,519 including acquisition fees and
certain acquisition expenses. Generally, the Partnership leases
properties on a "net lease" basis to corporations having a net
worth at the time of acquisition in excess of $40,000,000.
All of the Partnership's business is generated from real estate
operations; therefore, presentation of industry segment information
is not applicable. During 1996, 76% of the Partnership's rental
income was received from four properties, each of which
individually contributed more than 15% of the total. During 1995,
77% of the Partnership's rental income was received from four
properties, each of which individually contributed more than 15% of
the total. During 1994, 82.5% of the Partnership's rental income
was received from three properties each of which individually
contributed more than 15% of the total. A breakdown of rental
income by tenant is included in Note 7 to the financial statements.
A further description of the Partnership's business is included in
Management's Discussion and Analysis of Financial Condition and
Results of Operations included as Item 7 of this Form 10-K.
The Objectives of the Partnership are:
(1) to preserve and protect the limited partners' original capital
contributions by the free and clear "all cash"
acquisition of income-producing improved real estate properties;
(2) to produce long-term gains through appreciation of the
Partnership's properties;
(3) to provide the limited partners with quarterly cash distributions;
(4) to realize certain limited tax benefits, principally through
depreciation deductions so that taxable income of the
partnership will be offset to some extent by deductible
items, with the result that investors may receive distributions
generated from the Partnership's operation with a reduced income
tax liability associated with the distribution of income.
2
There can be no assurance that such objectives can be attained. It
is not an objective of the Partnership to shelter taxable income of
investors that is derived from sources other than the Partnership.
Properties
As of December 31, 1996, the Partnership owned eight properties all
in fee simple. Four of these properties are located in Texas and
one each in Arizona, Georgia, Minnesota and Missouri.
Although the specific terms of each lease vary, a summary of the
terms of the leases are as follows:
The primary term of the leases ranges from ten to twenty years.
Four of the leases also provide for two to four five-year renewal
options. The leases are all "triple-net" leases whereby the
tenants are responsible for the property taxes, insurance and
operating costs. Annual rental income ranges from $51,756 to
$246,750. All of the leases provide for either percentage rents
based on sales in excess of certain amounts, periodic escalations
in the annual rental rates or both.
During 1996, four of the Partnership's leases each contributed more
than 15% of the Partnership's total rental income. Summarized as
follows are the significant items pertaining to each of these leases:
<TABLE>
<CAPTION>
Golden Corral TGI Friday's Tandy One Care Health
Corporation Inc. Corporation Industries, Inc.
<S> <C> <C> <C> <C>
Lease Term 15 Years 10 Years 15 Years 10 Years
Expiration Date of
Primary Term March 2008 January 2003 August 2009 January 2005
Renewal Options N/A N/A N/A 2 terms of 5
years each
Square Footage of
Improvements 11,414 8,500 15,000 14,760
Base Annual Rental $ 172,965 $ 180,500 $ 246,750 $ 144,240
</TABLE>
All of the Partnership's leases specify a minimum amount of
insurance coverage required to be carried by each tenant.
Management of the Partnership believes that the insurance policies
required to be carried by the tenants will adequately cover the
replacement cost of the properties and any personal liability
losses which the tenants may sustain.
Property Management
Each property is managed by American Asset Advisers Realty
Corporation ("AAA"), an affiliate of the Managing General Partner.
Such management includes providing leasing services in connection
with identifying and qualifying prospective tenants, assisting in
the negotiation of the leases, providing quarterly financial
statements, receiving and depositing monthly lease payments,
periodic verification of tenants' payments of real estate taxes and
insurance coverage, and periodic inspection of properties and
tenants' sales records where applicable. The Managing General
Partner or such affiliates are reimbursed for administrative
services at cost. The tenants are responsible, at their expense,
for day-to day on-site management and maintenance of the
properties.
3
Financing - Borrowing Policies - No Leverage
The General Partners expect that the Partnership will incur no
indebtedness in connection with the operation of the properties.
However, in the exercise of their fiduciary duties, the General
Partners may elect to borrow funds on behalf of the Partnership,
but only if necessary in their judgment to avoid what would
otherwise be substantial adverse consequences to the Partnership.
All properties will be acquired on a debt-free basis.
The Partnership will not issue any senior securities nor will it
invest net proceeds of this offering in junior mortgages, junior
deeds of trust or similar obligations.
Sale of Properties
The General Partners expect that most of the properties will be
sold eight to twelve years after acquisition. The determination of
whether a particular property should be sold or otherwise disposed
of will be made after consideration of performance of the property
and market conditions and will depend, in part, on the economic
benefits of continued ownership. In deciding whether to sell
properties, the General Partners will consider factors such as
potential capital appreciation, cash flow and federal income tax
consequences. The General Partners or their affiliates anticipate
performing various substantial real estate brokerage functions in
connection with the sale of properties by the Partnership. The
Partnership will not purchase or lease any property from, or sell
or lease any property to, the General Partners or their affiliates.
Until September 1997, any net proceeds of sale of any property may,
at the election of the General Partners based upon their then
current evaluation of the real estate market conditions, either be
distributed to the partners or be reinvested in other properties.
Any properties in which net proceeds of the sale are reinvested
will be subject to the same acquisition guidelines as properties
initially acquired by the Partnership. Except under the limited
circumstances described in the preceding sentence, the net proceeds
of sale of properties will be distributed to the partners. In
addition, the Partnership will not reinvest any net proceeds of
sale unless sufficient proceeds are distributed to the limited
partners to pay any state or federal income taxes generated from
the sale (assuming the limited partners are taxable at a combined
federal and state marginal rate after such transactions of not more
than 38%).
In connection with the sale of a property owned by the Partnership,
purchase money obligations secured by mortgages may be taken as
partial payment. The terms of payment to the Partnership will be
affected by custom in the area in which the property being sold is
located and the then prevailing economic conditions. To the extent
the Partnership receives notes and property other than cash on
sales, such proceeds will not be included in net proceeds of sale
until and to the extent the notes or other property are actually
collected, sold, refinanced or otherwise liquidated. Therefore, the
distribution to the partners of the proceeds of a sale may be
delayed until the note or other property is collected at maturity,
sold, refinanced or otherwise converted to cash. The Partnership
may receive payments (cash and other property) in the year of sale
in an amount less than the full sales price and subsequent payments
may be spread over several years. The entire balance of the
principal may be a balloon payment due at maturity. For federal
income tax purposes, unless the Partnership elects otherwise it
will report the gain on such sale ratably as principal payments are
received under the installment method of accounting.
Competitive Conditions
The properties owned by the Partnership are leased to fast-food and
family-style restaurants, retail businesses and a medical facility.
These businesses face competition from similar establishments
within the surrounding areas.
At the time a property is sold or otherwise disposed of, the
Partnership will be in competition with others who are also seeking
buyers for their properties.
4
Employees
The overall management decisions of the Partnership are made by the
Managing General Partner, American Asset Advisers Management
Corporation X, which delegates certain day to day functions to the
officers of AAA, consultants and employees of AAA. The Partnership
itself has no employees.
Item 2. Properties
As of March 25, 1997, the Partnership owned eight properties in fee
simple, six directly and two through joint ventures with
affiliated entities. The properties are located in Texas, Arizona,
Georgia, Minnesota and Missouri. They are operated as retail
stores, as restaurants and as a medical facility.
Land - The Partnership's Property sites range from approximately
34,000 to 125,000 square feet depending upon building size and
local demographic factors. Sites purchased by the Partnership are
in high traffic corridors and have been reviewed for traffic and
demographic pattern and history.
Buildings - The buildings are all single tenant and are generally
rectangular. They are positioned for good exposure to traffic flows
and are constructed from various combinations of stucco, steel,
wood, brick and tile. Buildings range from approximately 2,300 to
15,000 square feet. Buildings are suitable for possible conversion
to other uses, although modifications may be required prior to use
for other operations. There are no plans for renovation or
improvements.
Leases - Tenants are companies whose net worth exceeds a minimum of
$40,000,000. Tenants are diversified by business type and are
represented by the following types of business: automotive,
consumer electronics, consumer entertainment, consumer retail, full
service restaurants, fast food restaurants and medical
facilities.
Geographic Location - The properties are located within major
metropolitan areas (S.M.S.A.) with populations that exceed 250,000.
A total of $9,951,519 has been invested in properties as of
December 31, 1996, for the Partnership. This includes land,
building and acquisition costs. A further description of the
Partnership properties, including acquisition fees and certain
acquisition expenses, is included in Item 1 and in Schedule
III-Real Estate Owned and Accumulated Depreciation of this Form
10-K.
Item 3. Legal Proceedings
The Partnership does not have any material legal proceedings
pending.
Item 4. Submission of Matters to a Vote of Security Holders
During the fiscal year ended December 31, 1996, no matter was
submitted to a vote of security holders through the solicitation of
proxies or otherwise.
5
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
As of March 25, 1997, 728 limited partners had subscribed for
11,453.61 Units. No established public trading market currently
exists for the Units.
For the years ended December 31, 1996, 1995 and 1994 the
Partnership paid cash distributions to the Limited Partners (LPs)
in the amount of $916,861, $879,065 and $515,254, respectively. The
General Partners (GPs) received distributions of $3,600, $4,100
and $2,650, respectively. The distributions were paid entirely from
the operating profits of the Partnership.
A summary of the distributions by quarter is as follows:
Quarter 1996 1995
Ended GPs LPs GPs LPs
March 31 $ 900 $ 229,072 $ 900 $ 206,165
June 30 $ 900 $ 229,072 $ 900 $ 220,483
September 30 $ 900 $ 229,072 $ 1,700 $ 223,345
December 31 $ 900 $ 229,645 $ 600 $ 229,072
The Partnership intends to continue the payment of quarterly
distributions. There are currently no material legal restrictions
that would limit the Partnership's ability to pay distributions.
<TABLE>
Item 6. Selected Financial Data
<CAPTION>
1996 1995 1994 1993 1992 (1)
Year Ending December 31:
<S> <C> <C> <C> <C> <C>
Operating revenue $1,011,429 $ 983,408 $ 531,694 $ 142,168 $ 0
Net income (loss) $ 737,212 $ 731,773 $ 472,659 $ 109,365 $ (56)
Net income per Unit $ 64.36 $ 63.89 $ 47.55 $ 30.52 N/A (2)
Cash distributions per
Limited Partnership Unit $ 80.05 $ 76.75 $ 51.83 $ 32.38 N/A
Total assets $9,878,759 $10,069,044 $10,206,842 $5,836,705 $ 944
Long term obligations $ 0 $ 0 $ 0 $ 0 $ 0
<FN>
<F1>
(1) Represents the period of September 17, 1992 (inception) to
December 31, 1992.
<F2>
(2) The net loss for 1992 all pertains to the General Partner.
</TABLE>
Item 7. Management's Discussion and Analysis of the Partnerships
Financial Condition and Results of Operations.
The Partnership was organized on April 15, 1992, to acquire, on a
debt-free basis, existing and newly constructed commercial
properties located in the continental United States and
particularly in the Southwest, to lease these properties to tenants
under generally "triple net" leases, to hold the properties with
the expectation of equity appreciation and eventually to resell the
properties.
The Partnership's overall investment objectives are to acquire
properties that offer investors the potential for (i) preservation
and protection of the Partnership's capital; (ii) partially
tax-deferred cash distributions from operations; and (iii)
long-term capital gains through appreciation in value of the
Partnership's properties realized upon sale.
6
LIQUIDITY AND CAPITAL RESOURCES
On September 17, 1992, the Partnership commenced an offering to the
public of up to $20,000,000 (20,000 Units) of limited partnership
units. The proceeds of the offering, rental income from the
Partnership's properties and interest income are the Partnership's
source of capital. The Partnership closed its offering on September
1, 1994 having raised $11,453,610. Limited partners are not
required to make any additional capital contributions.
The Partnership's investment strategy of acquiring properties for
all cash and leasing them under net leases to corporations
minimizes the Partnership's operating expenses. The General
Partners believe that net rental income from the leases will
generate cash flow in excess of Partnership operating expenses.
Since the leases generally have initial or remaining terms of 10 to
20 years and provide for specified rental increases in excess of
the initial base rent, it is anticipated that Partnership income
will increase over time. In addition, because of low operating
expenses and ongoing cash flow, the General Partners do not believe
that large working capital reserves are necessary at this time.
Because all leases of the Partnership's properties are on a net-lease
basis, it is not anticipated that a large reserve for
maintenance and repairs will be necessary. The Partnership intends
to distribute a significant portion of its cash available for
distribution unless it becomes necessary to maintain additional
reserves.
As of December 31, 1996, the Partnership had acquired eight
properties and had invested $9,951,519, including certain
acquisition expenses related to the Partnership's investment in
these properties. These expenditures resulted in a corresponding
decrease in the Partnership's liquidity.
The Partnership has determined that, beginning on December 1, 1993
it inadvertently failed to update its then outstanding prospectus
with current information as required by Section 10 (a) (3) of the
Securities Act of 1933 as amended (the "33 Act") and by the
standard undertakings made by the Partnership in its amended
registration statement filed pursuant to the '33 Act. However, the
Partnership did publicly disclose such information in its Form 8-K,
10-Q and 10-K filings with the Securities and Exchange Commission.
As a result of the above information, the Partnership has been
advised that it has a contingent liability to investors for
rescission rights or damages which, at a maximum, would not exceed
approximately $5.5 million. This would result in a decrease in the
Partnership's liquidity. Management anticipates that rescissions,
if any, will not be material.
The Partnership made cash distributions from operations to the
limited partners during each quarter of 1996 and 1995, distributing
a total of $916,861 and $879,065 respectively to the limited
partners.
Inflation has had very little effect on income from operations.
Management expects that increases in store sales volumes due to
inflation as well as increases in the Consumer Price Index (C.P.I.)
may contribute to capital appreciation of the Partnership
properties. These factors, however, also may have an adverse
impact on the operating margins of the tenants of the properties.
7
RESULTS OF OPERATIONS
Years Ended December 31, 1996, and 1995:
The Partnership acquired its eighth property in September 1996 for
$662,242. Rental income from this property contributed to an
increase in income from the Partnership's real estate activities to
$1,011,429 in 1996 from $983,408 in 1995. Four of the eight
properties owned by the Partnership as of December 31, 1996
contributed 76% of the Partnership's total rental income for 1996
and each contributed over 15% of the rental income. Interest
income declined from $46,545 to $25,482 as funds which had been
held in short term investments were used to acquire real estate
properties. The Partnership's operating expenses remained
unchanged from 1995. Net income increased to $737,212 from $731,773.
Years Ended December 31, 1995, and 1994:
The Partnership acquired its seventh property in January 1995 for
$1,477,838. Rental income from this property and from four
properties which were acquired in 1994 contributed to an increase
in income from the Partnership's real estate activities to $983,408
in 1995 from $531,694 in 1994. Four of the seven properties owned
by the Partnership as of December 31, 1995 contributed 77% of the
Partnership's total rental income for 1995 and each contributed
over 15% of the rental income. Interest income declined from
$135,104 to $46,545 as funds which had been held in short term
investments were used to acquire real estate properties. The
Partnership's increased activity also resulted in a $45,950
increase in operating expenses from 1994. Net income increased to
$731,773 from $472,659.
In 1995, the Partnership placed $14,250 in escrow for an
International House of Pancakes property (IHOP) subject to the
achievement of certain conditions. The agreement to acquire the
property was terminated in February 1996 because the environmental
conditions were not met to the satisfaction of all the parties to
the transaction. The escrow deposit will be refunded to the
Partnership. Accordingly, these funds are reflected in the
financial statements as an account receivable.
Item 8. Financial Statements and Supplementary Data.
The response to this item is submitted in Item 14(a) of this report
and is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Registrant has no officers or directors. The Individual and
Managing General Partners are as follows:
H. Kerr Taylor, age 46, is the Individual General Partner of the
Partnership. Mr. Taylor has been an attorney since 1979, has earned
an M.B.A. at Southern Methodist University, is a real estate broker
and has over twenty years of experience as a specialist in acquiring
and operating income-producing real properties. He has been involved
in the development, analysis, marketing and management of private
investment programs investing in properties since 1975. Mr. Taylor
is the president, the sole director and sole shareholder of
American Asset Advisers Realty Corporation ("AAA"), a real estate
operating company he founded in 1988. Mr Taylor has served in this
capacity since the company's formation.
8
Mr. Taylor is currently a general partner or principal of a general
partner of eleven affiliated limited partnerships. Mr. Taylor is a
member of the Texas Association of Realtors, Texas Bar Association
and a former member of the American Bar Association. Mr. Taylor
holds the Series 7, 22, 24, 39, and 63 securities licenses.
American Asset Advisers Management Corporation X is a Nebraska
corporation which was organized for the sole purpose of acting as
the Managing General Partner of the Partnership. The Managing
General Partner has a nominal net worth. The two initial voting
shareholders of American Asset Advisers Management Corporation X
are Mr. Taylor and Realty Assets, Inc., a Nebraska corporation.
Mr. Taylor's ownership interest is 80% of the stock of the Managing
General Partner; Realty Assets, Inc. owns the remaining 20%. Realty
Assets, Inc. received its 20% interest as consideration for
agreeing to assume the risks associated with advancing a portion of
the organizational and offering costs relating to this offering.
The President and Treasurer of the Managing General Partner is Mr.
Taylor who is also a Director. Stephen K. Wild, a resident of
Omaha, Nebraska, has been named Vice President, Secretary and a
Director of the Managing General Partner. Messrs. Taylor and Wild
are the two Directors of the Managing General Partner.
Mr. Wild, age 47, is the Chairman and President of Securities
America, Inc., a registered broker/ dealer, which was also the
dealer/manager of the Partnership during the offering period. Mr.
Wild has served as the Chairman of the Board of Securities America,
Inc. since 1984 and also as its President since February 1991. Mr.
Wild has also been the Chairman and President of Financial
Dynamics, Inc., the holding company for Securities America, Inc.
and certain other financial service companies since September 1985.
Realty Assets, Inc. which owns 20 percent of the common stock of
the Managing General Partner, is an affiliate of the
Dealer/Manager. Realty Assets, Inc. is controlled by Mr. Wild.
The affairs of the Partnership are conducted by AAA. In addition
to Mr. Taylor as president, other officers of AAA include:
Joe Mayer, age 41, is the Chief Operating Officer of AAA. Mr.
Mayer has over twenty years of experience in business, accounting,
investments and real estate transactions. Mr. Mayer is a certified
public accountant and worked for a national public accounting firm.
Mr. Mayer received his B.B.A. degree in accounting from the
University of Kentucky.
L. Larry Mangum, age 32, serves as Vice President of Finance of
AAA. Mr. Mangum is responsible for the financial accounting and
reporting relating to the AAA-sponsored partnerships and their
properties. He has over 9 years of accounting experience,
including four years with a public accounting firm. He previously
worked for American General Corporation, a national insurance
company, from 1991-1996 as part of a team responsible for
supervising their reporting activities. Mr. Mangum received a
B.B.A. degree in accounting from Stephen F. Austin State University
and subsequently earned the CPA designation.
Other individuals who are specialists in their respective fields
are periodically employed by AAA and are engaged on an as-needed
basis to perform services on behalf of the Partnership or the
Managing General Partner or both. These individuals are not
employees of the Partnership or the Managing General Partner nor
are they employees of other AAA-sponsored partnerships, although
they do perform various services and activities for those
partnerships.
These individuals are:
Phil P. Moss, age 66, is the Executive Vice President of AAA. Mr.
Moss has been involved as a real estate investor in owning,
operating and managing shopping centers, office buildings,
apartment projects, retail outlets and various other properties for
9
over 26 years. Specifically in his capacity with AAA, Mr. Moss has
been involved in leasing and property acquisitions for various
companies since 1988. He received his B.B.A. degree from and did
graduate work at the University of Texas. He is a retired Major in
the United States Air Force.
Jane Costello, age 40, is a certified public accountant and is
responsible for the tax accounting related to the AAA-sponsored
partnerships and their properties. She has over 17 years experience
as an accountant including over 4 years with a national public
accounting firm and the last seven years with her own accounting
practice. Ms. Costello received a B.B.A. degree in accounting from
the University of Texas.
Based on a review of Forms 3 and 4 and amendments thereto furnished
to Registrant pursuant to Rule 16A-3(e) under the Securities
Exchange Act of 1934 (the "Exchange Act") during its most recent
fiscal year and Form 5 and amendments thereto furnished to
Registrant with respect to its most recent fiscal year and written
representations received pursuant to Item 405(b)(2)(i) of
Regulation S-K, none of the Individual or Managing General Partners
of Registrant or beneficial owners of more than 10% of the Units
failed to file on a timely basis reports required by Section 16(a)
of the Exchange Act during the most recent fiscal year.
Item 11. Executive Compensation
Other than as discussed in Item 13, neither the Individual General
Partner nor any of the directors and officers of the Managing
General Partner received any remuneration from the Registrant. The
Individual General Partner and his affiliates received fees and
reimbursements of expenses from the Partnership as discussed in
Note 9 to the accompanying financial statements.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
As of December 31, 1996, no person was known by the Registrant to
be the beneficial owner of more than 5% of the Units of the
Registrant.
Neither General Partner owns any Units nor does any director or
officer of the Managing General Partner own any Units.
Item 13. Certain Relationships and Related Transactions
The Individual General Partner and the Managing General Partner
received cash distributions from operations during, or with respect
to, the fiscal year ended December 31, 1996, 1995 and 1994 of
$3,600, $4,100 and $2,650, respectively. For a description of the
share of cash distributions from operations, if any, and fees to
which the General Partners are entitled, reference is made to the
material contained in the Prospectus under the headings CASH
DISTRIBUTIONS AND TAX ALLOCATIONS.
The Registrant has entered into arrangements with AAA pursuant to
which AAA has assumed direct responsibility for day-to-day
management of the Partnership's properties. This service includes
the supervision of leasing, rent collection, maintenance,
budgeting, employment of personnel, payment of operating expenses,
etc. AAA is reimbursed for its actual costs associated with
performing the foregoing services but does not receive a property
management fee. In connection with administrative services rendered
to the Partnership, $65,883, $58,846 and $25,440 was incurred and
paid to AAA in 1996, 1995 and 1994, respectively. See Note 9 of
the accompanying financial statements.
10
Mr. Taylor, President of AAA, receives compensation from AAA for
services performed for AAA, which may include services rendered in
connection with the Registrant. However, the Managing General
Partner believes that any compensation relating to services is not
material.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) (1) Financial Statements
Independent Auditors' Report
Balance Sheets December 31, 1996 and 1995
Statements of Operations for the Years Ended December 31,
1996, 1995 and 1994
Statements of Partnership Equity for the Years Ended
December 31, 1996, 1995 and 1994
Statements of Cash Flows for the Years Ended December 31,
1996, 1995 and 1994
Notes to Financial Statements for the Years Ended December 31,
1996, 1995 and 1994
(2) Financial Statement Schedules: See (d) below
(3) Exhibits: See (c) below
(b) Reports on Form 8-K filed after September 30, 1996:
None
(c) Exhibits
3 See Exhibit 4(a)
4 (a) Amended and Restated Certificate and Agreement of
Limited Partnership (included as Exhibit A to the
prospectus of Registrant dated September 17, 1992
contained in Registration Statement No. 33-47638
of Registrant (the "Prospectus") and incorporated
herein by reference).
4 (b) Subscription Agreement and Signature Page
(included as Exhibit D to the Prospectus and
incorporated herein by reference).
10 (a) (1) Joint Venture Agreement between Registrant and
AAA Net Realty Fund IX, Ltd. dated March 15,
1993 (Incorporated by reference to the
exhibit filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1994)
10 (a) (2) Agreement of Purchase and Sale between
Golden Corral Corporation and AAA Realty
IX and X Joint Venture dated March 11,
1993 (Incorporated by reference to the
exhibit filed with the Registrant's
Annual Report on Form 10-K for the fiscal
year ended December 31, 1994)
11
10 (a) (3) Lease Agreement between Golden Corral
Corporation and AAA Realty IX and X Joint
Venture dated March 11, 1993
(Incorporated by reference to the exhibit
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1994)
10 (a) (4) Contract for Purchase and Sale of Real
Estate between Richard Motycka Trustee
and Registrant dated November 18, 1993
(Incorporated by reference to the exhibit
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1994)
10 (a) (5) Assignment and Assumption of Lease
between Registrant and Southpoint
Shopping Center L.C. dated December 22,
1993 (Incorporated by reference to the
exhibit filed with the Registrant's
Annual Report on Form 10-K for the fiscal
year ended December 31, 1994)
10 (a) (6) Earnest Money Contract between Registrant
and Jefco Development Corporation
(Incorporated by reference to the exhibit
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1994)
10 (a) (7) Assignment of Lease Agreement between
Registrant and Jefco Development Corporation
dated March 30, 1994 (Incorporated by
reference to the exhibit filed with the
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994)
10 (a) (8) Real Estate Sales Agreement between
Registrant and America's Favorite Chicken
Company dated June 13, 1994 (Incorporated
by reference to the exhibit filed with
the Registrant's Annual Report on Form
10-K for the fiscal year ended December
31, 1994)
10 (a) (9) Lease Agreement between Registrant and
America's Favorite Chicken Company dated July
19, 1994 (Incorporated by reference to the
exhibit filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1994)
10 (a) (10) Contract for Purchase and Sale of Real
Estate between Registrant and Beechwood
Acquisitions, Inc. dated January 13, 1994
(Incorporated by reference to the exhibit
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1994)
10 (a) (11) Assignment and Assumption of Lease
between Roseville Partnership No. 20 and
Registrant dated August 25, 1994
(Incorporated by reference to the exhibit
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1994)
10 (a) (12) Joint Venture Agreement between
Registrant and American Asset Advisers
Trust, Inc. dated October 27, 1994
(Incorporated by reference to the exhibit
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1994)
10 (a) (13) Agreement for Purchase and Sale of Real
Estate between Registrant and KCBB, Inc.
dated October 11, 1994 (Incorporated by
reference to the exhibit filed with the
Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994)
10 (a) (14) Assignment and Assumption of Lease
between KCBB, Inc. and AAA Joint Venture
94-1 dated November 11, 1994
(Incorporated by reference to the exhibit
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1994)
12
10 (a) (15) Agreement for Purchase and Sale of Real
Estate between Registrant and TA/ Colony
Medical, Ltd. dated October 27, 1994
(Incorporated by reference to the exhibit
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1994)
10 (a) (16) Assignment and Assumption of Lease
between TA/Colony Medical, Ltd. and
Registrant dated January 17, 1995
(Incorporated by reference to the exhibit
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1994)
10 (a) (17) Joint Venture Agreement between American Asset
Advisers Trust, Inc. and AAA Net Realty Fund X, Ltd. and
AAA Net Realty Fund XI, Ltd., dated April 5, 1996.
27 Financial Data Schedule.
(d) Financial Statements Schedules
Schedule III - Real Estate Owned and Accumulated Depreciation
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AAA Net Realty Fund X, Ltd.
March 25, 1997 /s/ H. Kerr Taylor
Date H. Kerr Taylor, Individual General Partner
America Asset Advisers Management
Corporation X, Managing General Partner
March 25, 1997 By: /s/ H. Kerr Taylor
Date H. Kerr Taylor
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following person
on behalf of the Registrant and in the capacities and on the
dates indicated .
March 25, 1997 /s/ H. Kerr Taylor
Date H. Kerr Taylor
President (Chief Executive Officer and
Chief Financial Officer) and Director
March 25, 1997 /s/ Stephen K. Wild
Date Stephen K. Wild, Director
March 25, 1997 /s/ L. Larry Mangum
Date L. Larry Mangum (Principal Accounting
Officer)
14
ANNUAL REPORT ON FORM 10-K
ITEMS 8, 14 (a) (1) AND (2) AND 14 (d)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
AND FINANCIAL STATEMENT SCHEDULE
FOR THE YEAR ENDED DECEMBER 31, 1996
AAA NET REALTY FUND X, LTD.
F-1
AAA NET REALTY FUND X, LTD.
INDEX TO FINANCIAL STATEMENTS
Page
FINANCIAL STATEMENTS:
Independent Auditors' Report F-3
Balance Sheets, December 31,1996 and 1995 F-4
Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994 F-5
Statements of Partnership Equity for the Years
Ended December 31, 1996, 1995 and 1994 F-6
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-7 to F-8
Notes to Financial Statements for the Years Ended
December 31, 1996, 1995 and 1994 F-9 to F-14
FINANCIAL STATEMENT SCHEDULE:
Schedule III Real Estate Owned and Accumulated
Depreciation for the Year Ended December 31, 1996 F-15
All other financial statement schedules are omitted as the required
information is either inapplicable or is included in the financial
statements or related notes.
F-2
INDEPENDENT AUDITORS' REPORT
AAA Net Realty Fund X, Ltd.
We have audited the accompanying balance sheets of AAA Net Realty
Fund X, Ltd. as of December 31, 1996 and 1995, and the related
statements of operations, partnership equity and cash flows for
each of the three years in the period ended December 31, 1996. Our
audits also included the financial statement schedule listed in the
Index. These financial statements and Financial Statement Schedule
are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on the financial statements
and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of AAA Net Realty Fund X,
Ltd. as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally
accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Houston, Texas
February 14, 1997
F-3
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
ASSETS
CASH AND CASH EQUIVALENTS $ 193,466 $ 824,805
ACCOUNTS RECEIVABLE 195 14,780
PROPERTY:
Land 2,566,250 2,566,250
Buildings 5,370,984 5,370,984
7,937,234 7,937,234
Accumulated depreciation (400,416) (255,950)
NET PROPERTY 7,536,818 7,681,284
NET INVESTMENT IN DIRECT FINANCING LEASE 612,034 615,410
INVESTMENT IN JOINT VENTURES 1,379,039 724,549
OTHER ASSETS:
Prepaid acquisition costs - 23,231
Organization costs, net of accumulated
amortization of $212,245 and $152,245,
respectively 87,755 147,755
Accrued rental income 69,452 37,230
TOTAL OTHER ASSETS 157,207 208,216
TOTAL ASSETS $ 9,878,759 $ 10,069,044
LIABILITIES & PARTNERSHIP EQUITY
LIABILITIES:
Accounts payable $ 1,409 $ 8,445
Security deposit 12,000 12,000
TOTAL LIABILITIES 13,409 20,445
PARTNERSHIP EQUITY:
General partners 11,105 7,333
Limited partners 9,854,245 10,041,266
TOTAL PARTNERSHIP EQUITY 9,865,350 10,048,599
TOTAL LIABILITIES AND PARTNERSHIP
EQUITY $ 9,878,759 $ 10,069,044
See Notes to Financial Statements.
F-4
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
REVENUES
Rental income from operating leases $ 857,201 $ 851,271 $ 493,655
Earned income from direct financing lease 63,727 64,065 29,672
Interest income 25,482 46,545 135,104
Equity income from investment in
joint ventures 90,501 68,072 8,367
TOTAL REVENUES 1,036,911 1,029,953 666,798
EXPENSES
Administrative expenses 65,883 58,846 25,440
Accounting fees 10,398 13,886 16,885
Amortization 60,000 60,000 60,000
Depreciation 144,466 143,362 85,271
Legal & professional fees 15,644 19,187 4,592
Other 3,308 2,899 1,951
TOTAL EXPENSES 299,699 298,180 194,139
NET INCOME $ 737,212 $ 731,773 $ 472,659
ALLOCATION OF NET INCOME:
General partners $ 7,372 $ 7,318 $ 4,727
Limited partners 729,840 724,455 467,932
$ 737,212 $ 731,773 $ 472,659
NET INCOME PER UNIT $ 64.36 $ 63.89 $ 47.55
WEIGHTED AVERAGE UNITS OUTSTANDING 11,454 11,454 9,941
See Notes to Financial Statements.
F-5
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERSHIP EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
General Limited
Partners Partners Total
PARTNERSHIP EQUITY,
DECEMBER 31, 1993 $ 2,038 $ 5,781,569 $ 5,783,607
CAPITAL CONTRIBUTIONS, NET - 4,461,629 4,461,629
DISTRIBUTIONS ($51.83 per Limited
Partnership Unit) (2,650) (515,254) (517,904)
NET INCOME 4,727 467,932 472,659
PARTNERSHIP EQUITY
DECEMBER 31, 1994 4,115 10,195,876 10,199,991
DISTRIBUTIONS ($76.75 per Limited
Partnership Unit) (4,100) (879,065) (883,165)
NET INCOME 7,318 724,455 731,773
PARTNERSHIP EQUITY,
DECEMBER 31, 1995 7,333 10,041,266 10,048,599
DISTRIBUTIONS ($80.05 per Limited
Partnership Unit) (3,600) (916,861) (920,461)
NET INCOME 7,372 729,840 737,212
PARTNERSHIP EQUITY,
DECEMBER 31, 1996 $ 11,105 $ 9,854,245 $ 9,865,350
See Notes to Financial Statements.
F-6
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 737,212 $ 731,773 $ 472,659
Adjustments to reconcile net income
to net cash flows from operating
activities:
Depreciation 144,466 143,362 85,271
Amortization 60,000 60,000 60,000
(Increase) decrease in accounts
receivable 14,585 (12,492) 256
Increase (decrease) in accounts
payable (7,036) 1,594 (46,247)
Increase in security deposit - 12,000 -
(Increase) decrease in escrow
deposits - 50,000 (30,000)
Income recognized from direct
financing lease less than
(in excess of) cash received 3,376 3,041 (1,517)
Investment in joint venture:
Equity income (90,501) (68,072) (8,367)
Distributions received 90,501 68,072 8,367
Increase in organization costs - - (8,915)
Increase in accrued rental income (32,222) (32,890) (4,340)
NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES 920,381 956,388 527,167
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of properties:
Accounted for under the operating
method - (1,477,840) (3,389,490)
Accounted for under the direct
financing method - - (616,934)
Investment in joint venture (662,242) - (735,136)
Joint venture distributions in excess
of income 7,752 8,938 1,649
Change in prepaid acquisition costs 23,231 59,920 (39,959)
NET CASH FLOWS USED IN INVESTING
ACTIVITIES (631,259) (1,408,982) (4,779,870)
F-7
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions - limited partners,
net of syndication costs - - 4,461,629
Distributions (920,461) (883,165) (517,904)
NET CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES (920,461) (883,165) 3,943,725
NET DECREASE IN CASH AND CASH
EQUIVALENTS (631,339) (1,335,759) (308,978)
CASH AND CASH EQUIVALENTS
at Beginning of year 824,805 2,160,564 2,469,542
CASH AND CASH EQUIVALENTS
at End of year $ 193,466 $ 824,805 $2,160,564
See Notes to Financial Statements.
F-8
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
AAA Net Realty Fund X, Ltd. ("the Partnership") is a limited
partnership formed April 15, 1992, under the laws of the State
of Nebraska. The Partnership commenced operations as of
September 17, 1992. American Asset Advisers Management
Corporation X (a Nebraska corporation) is the Managing General
Partner and H. Kerr Taylor is the Individual General Partner.
An aggregate of 20,000 Units were offered at a $1,000 maximum
offering price per Unit. The Partnership closed its offering on
September 1, 1994 having received capital contributions for
11,453.61 Units ($11,453,610).
The Partnership was formed to acquire commercial properties for
cash. The Partnership will own, lease, operate, manage and
eventually sell the properties. The selection, acquisition and
supervision of the operations of the properties is managed by
American Asset Advisers Realty Corporation ("AAA"), a related
party.
BASIS OF ACCOUNTING
The financial records of the Partnership are maintained on the
accrual basis of accounting whereby revenues are recognized when
earned and expenses are recorded when incurred.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Partnership
considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash
equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds.
PROPERTY
Property is leased to others on a net lease basis whereby all
operating expenses related to the properties, including property
taxes, insurance and common area maintenance are the
responsibility of the tenant. The leases are accounted for under
the operating lease method or the direct financing lease method.
Under the operating lease method, the properties are recorded
at cost. Rental income is recognized ratably over the life of
the lease and depreciation is charged based upon the estimated
useful life of the property. Under the direct financing lease
method, the properties are recorded at their net investment (see
Note 5). Unearned income is deferred and amortized to income
over the life of the lease so as to produce a constant periodic
rate of return.
The Partnership's lease agreements do not provide for contingent
rentals.
F-9
The Partnership obtains an appraisal on each property prior to
a property's acquisition and also performs an annual valuation
update to evaluate potential impairment for each property for
which an appraisal is older than twelve months. This valuation
is based on capitalization of income for each property, a review
of current market conditions and any significant events or
factors which would indicate a potential impairment to the value
of a property.
INVESTMENT IN JOINT VENTURES
The Partnership's interest in joint ventures are accounted for
under the equity method whereby the Partnership's investment is
increased or decreased by its share of earnings or losses in the
joint ventures and also decreased by any distributions.
DEPRECIATION
Buildings are depreciated using the straight-line method over
estimated useful lives ranging from 31.5 to 39 years.
ORGANIZATION COSTS
Organization costs incurred in the formation of the Partnership
are amortized on a straight-line basis over five years.
SYNDICATION COSTS
Syndication costs incurred in the raising of capital through the
sale of units are treated as a reduction of partnership equity.
STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
No cash was paid for income taxes or interest during 1996, 1995 or 1994.
INCOME TAXES
All income and expense items flow through to the partners for
tax purposes. Consequently, no provision for federal or state
income taxes is provided in the accompanying financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments, consisting of
cash, cash equivalents, accounts receivable and liabilities
approximate their fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
F-10
2. PARTNERSHIP EQUITY
The Managing General Partner, American Asset Advisers Management
Corporation X, and the Individual General Partner, H. Kerr
Taylor, have made capital contributions in the amounts of $990
and $10, respectively. All other contributions have been made
by the limited partners. The General Partners shall not be
obligated to make any other contributions to the capital of the
Partnership, except that, in the event that the General Partners
have negative balances in their capital accounts after
dissolution and winding up of, or withdrawal from, the
Partnership, the General Partners will contribute to the
Partnership an amount equal to the lesser of the deficit
balances in their capital accounts or 1.01% of the total capital
contributions of the limited partners over the amount previously
contributed by the General Partners.
3. ALLOCATIONS AND DISTRIBUTIONS
All income, profits, gains and losses of the Partnership for
each fiscal year, other than any gain or loss realized upon the
sale, exchange or other disposition of any of the Partnership's
properties, shall be allocated as follows: (a) net loss shall
be allocated 99% to the limited partners, .99% to the Managing
General Partner and .01% to the Individual General Partner; and
(b) net income will be allocated first in the ratio, and to the
extent, net cash flow is distributed to the partners for such
year and any additional income for such year will be allocated
99% to the limited partners, 1% to the General Partners.
For income tax purposes, the gain realized upon the sale,
exchange or other disposition of any property will be allocated
as follows:
(a) first, to and among the partners in an amount equal to the
negative balances in their respective capital accounts (pro rata
based on the relative amounts of such negative balances).
(b) then, to each limited partner until the balance in such
limited partner's capital account equals the amount to be
distributed to such limited partner in the first tier of
distributions of net proceeds of sale.
(c) then, to the General Partners, until the balance in their
capital accounts equals the amounts to be distributed to the
General Partners in the second tier of distributions of net
proceeds of sale.
(d) then 94% to the limited partners and 6% to the General
Partners, and
(e) thereafter, the partners shall be allocated gain or loss in
order to meet Treasury Regulations regarding qualified income
offset requirements.
Any loss on the sale, exchange or other disposition of any
property shall be allocated 99% to the limited partners and 1%
to the General Partners.
F-11
4. OPERATING LEASES
A summary of minimum future rentals, exclusive of any renewals,
under noncancellable operating leases in existence at December
31, 1996 are as follows:
1997 $ 922,835
1998 $ 935,159
1999 $ 943,160
2000 $ 947,594
2001 $ 961,626
2002-2016 $ 5,207,107
5. NET INVESTMENT IN DIRECT FINANCING LEASE
The Partnership's net investment in a direct financing lease at
December 31, 1996 and 1995 included:
1996 1995
Minimum lease payments receivable $ 1,396,060 $ 1,463,160
Unguaranteed residual value 300,558 300,558
Less: Unearned income 1,084,584 1,148,308
$ 612,034 $ 615,410
A summary of minimum future rentals, exclusive of any renewals,
under a noncancellable direct financing lease in existence at
December 31, 1996 are as follows:
1997 $ 115,773
1998 $ 115,773
1999 $ 118,907
2000 $ 122,562
2001 $ 123,775
2002-2016 $ 1,913,626
6. INVESTMENT IN JOINT VENTURES
On April 5, 1996, the Partnership formed a joint venture, AAA
Joint Venture 96-1, with AAA Net Realty Fund XI, Ltd. and
American Asset Advisers Trust, Inc., affiliated entities, for
the purpose of acquiring a property which is being operated as
a Just For Feet retail store in Tucson, Arizona. The property
was purchased on September 11, 1996 after construction was
completed. The Partnership's interest in the joint venture is
18.25%.
On October 27, 1994, the Partnership formed a joint venture, AAA
Joint Venture 94-1, with American Asset Advisers Trust, Inc.,
(a related party) for the purpose of acquiring a property on
lease to BlockBuster Music Retail Inc. in Missouri. The
Company's interest in the joint venture is 45.16%.
F-12
Summarized financial information for the joint ventures at
December 31, 1996 and 1995, are as follows:
1996 1995
Land & building,
net of accumulated depreciation $ 2,675,195 $ 1,603,138
Net investment in direct financing lease $ 2,572,325 $ -
Accounts receivable $ 15,538 $ -
Accrued rental income $ 23,148 $ 9,426
Partners' capital $ 5,286,206 $ 1,612,564
Rental income from operating lease $ 179,670 $ 179,950
Equity income from direct financing lease $ 123,244 $ -
Net income $ 273,544 $ 150,580
The Partnership recognized equity income of $90,501, $68,072 and
$8,367 from the joint ventures in 1996, 1995 and 1994, respectively.
7. MAJOR TENANTS
The Partnership's operations are all related to the acquisition
and leasing of commercial real estate properties. The following
schedule summarizes rental income by lessee for 1996, 1995 and
1994 under both operating lease and direct financing lease
methods of accounting:
1996 1995 1994
Golden Corral Corporation
(Texas) $ 172,956 $ 172,956 $ 172,956
TGI Friday's, Inc. (Texas) $ 180,500 $ 180,492 $ 175,500
Goodyear Tire & Rubber Company
(Texas) $ 52,920 $ 52,908 $ 39,690
Tandy Corporation (Minnesota) $ 256,620 $ 256,620 $ 90,368
America's Favorite Chicken
Company (Georgia) $ 97,414* $ 99,153 $ 44,813
One Care Health
Industries, Inc. (Texas) $ 160,518 $ 153,207 $ -
Total $ 920,928 $ 915,336 $ 523,327
* Decrease resulted from recognition of earned income under the
direct financing lease method of accounting. Rental payments
received remained unchanged from 1995.
8. INCOME RECONCILIATION
A reconciliation of net income for financial reporting purposes
to income for federal income tax purposes is as follows for the
year ended December 31:
1996 1995 1994
Net income for financial reporting
purposes $ 737,212 $ 731,773 $ 472,659
Direct financing lease recorded
as operating lease for tax
reporting purposes (16,520) (12,776) (7,449)
Accrued rental income (37,188) (37,147) (4,340)
Income for tax reporting purposes $ 683,504 $ 681,850 $ 460,870
F-13
9. RELATED PARTY TRANSACTIONS
The Partnership Agreement provides for the reimbursement for
administrative services necessary for the prudent operation of
the Partnership and its assets with the exception that no
reimbursement is permitted for rent, utilities, capital
equipment, salaries, fringe benefits or travel expenses
allocated to the Individual General Partner or to any
controlling persons of the Managing General Partner. In
connection with administrative services rendered to the
Partnership, $65,883, $58,846 and $25,440 was incurred and paid
to AAA in 1996, 1995 and 1994, respectively.
Acquisition fees, including real estate commissions, finders
fees, consulting fees and any other non-recurring fees incurred
in connection with locating, evaluating and selecting
properties and structuring and negotiating the acquisition of
properties were included in the basis of the properties.
Acquisition fees of $307,854 were incurred and paid to AAA for
the year ended December 31, 1994.
On April 5, 1996, the Partnership formed a joint venture, AAA
Joint Venture 96-1, with AAA Net Realty Fund XI, Ltd. and
American Asset Advisers Trust, Inc., affiliated entities, for
the purpose of acquiring a property which is being operated as
a Just For Feet retail store in Tucson, Arizona. The property
was purchased on September 11, 1996 after construction was
completed. The Partnership's interest in the joint venture is
18.25%.
On October 27, 1994, the Partnership entered into a joint
venture with American Asset Advisers Trust, Inc., an affiliated
Company for the purpose of acquiring a property in
Independence, Missouri on lease to Blockbuster Music Retail,
Inc. The Partnership's interest in the joint venture is 45.16%.
10. PROPERTY ACQUISITION IN 1996
On September 11, 1996, the Partnership acquired a 18.25%
interest in a newly constructed property on lease to Just For
Feet, Inc. through a joint venture with two related parties
for the purchase price of $662,242. The lease agreement
extends for twenty years, however the tenant has the option
to renew the lease for two additional terms of five years
each. The lease has provisions for an escalation in the rent
after the fifth, tenth, and fifteenth years of the lease.
The Partnership recorded $22,558 of income from Just For Feet
for 1996.
11. CONTINGENCY
The Partnership has determined that, beginning on December 1,
1993 it inadvertently failed to update its then outstanding
prospectus with current information as required by Section 10
(a) (3) of the Securities Act of 1933 as amended (the "33 Act")
and by the standard undertakings made by the Partnership in its
amended registration statement filed pursuant to the '33 Act.
However, the Partnership did publicly disclose such information
in its Form 8-K, 10-Q and 10-K filings with the Securities and
Exchange Commission.
As a result of the above information, the Partnership has been
advised that it has a contingent liability to investors for
rescission rights or damages which, at a maximum, would not
exceed approximately $5.5 million. Management anticipates that
rescissions, if any, will not be material.
F-14
<TABLE>
AAA NET REALTY FUND X, LTD.
SCHEDULE III - REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
PROPERTY ENCUM- IMPROVE- COST AT CLOSE OF YEAR ACCUMULATED DATE OF DATE INCOME STMT.
DESCRIPTION BRANCES BUILDING LAND MENTS BUILDING LAND DEPRECIATION CONST. ACQUIRED IS COMPUTED
PROPERTIES INVESTED IN
UNDER OPERATING LEASES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Golden Corral Restaurant,
Texas $0 $1,105,426 $473,754 $0 $1,105,426 $473,754 $132,596 N/A 03-15-93 31.5 Years
TGI Friday's Restaurant,
Texas $0 $1,084,060 $464,597 $0 $1,084,060 $464,597 $83,391 N/A 12-23-93 39 Years
Goodyear Tire & Automotive
Store, Texas $0 $377,261 $161,684 $0 $377,261 $161,684 $26,601 N/A 03-31-94 39 Years
Popeye's Chicken Restaurant,
Georgia $0 $0 $264,400 $0 $0 $264,400 $0 N/A 07-19-94 N/A
Computer City Super Center,
Minnesota $0 $1,769,749 $758,464 $0 $1,769,749 $758,464 $105,882 N/A 03-21-94 39 years
One Care Health
Industries, Inc., Texas $0 $1,034,488 $443,351 $0 $1,034,487 $443,351 $51,946 N/A 01-18-95 39 Years
$0 $5,370,984 $2,566,250 $0 $5,370,983 $2,566,250 $400,416
PROPERTY OF JOINT VENTURES
IN WHICH THE PARTNERSHIP HAS
AN INTEREST AND HAS INVESTED
IN UNDER AN OPERATING LEASE
Blockbuster Music Store,
Missouri $0 $514,595 $220,541 $0 $514,595 $220,541 $28,039 N/A 11-14-94 39 Years
Just For Feet, Arizona $0 $463,578 $198,664 $0 $463,578 $198,664 $3,599 N/A 09-11-96 39 Years
$0 $978,173 $419,205 $0 $978,173 $419,205 $31,638
PROPERTY INVESTED IN
UNDER DIRECT FINANCING LEASE
Popeye's Chicken Restaurant,
Georgia $0 $616,934 $0 $0 $616,934 $0 (2) N/A 07-19-94 N/A
Direct
Operating Joint Financing
Leases Ventures Lease
(1)Balance at December
31,1995 $7,937,234 $735,136 $616,934
Additions during 1996:
Acquisitions through
foreclosure $0 $0 $0
Other acquisitions $0 $662,242 $0
Improvements $0 $0 $0
Deductions during 1996:
Cost of real estate
sold $0 $0 $0
Other $0 $0 $0
Balance at December
31, 1996 $7,937,234 $1,397,378 $616,934
<FN>
<F1>
(2) The portion of the lease relating to the building of this property has been
recorded as a direct financing lease for financial reporting purposes.
Consequently, depreciation is not applicable.
<F2>
(3) The aggregate cost of all properties for Federal Income Tax purposes is
$9,951,546 at December 31, 1996.
</FN>
F-15
</TABLE>
Exhibit 10 (a) (17)
AGREEMENT OF AAA JOINT VENTURE 96-1
THIS AGREEMENT made and effective as of the 5th day of April,
1996, by and among AAA NET REALTY FUND X, LTD., a limited
partnership organized under the laws of the State of Nebraska
(herein sometimes referred to as the "AAA X"), AAA NET REALTY FUND
XI, LTD., a limited partnership organized under the laws of the
State of Texas (herein sometimes referred to as the "AAA XI") and
AMERICAN ASSET ADVISERS TRUST, INC., a Maryland corporation
conducting business in the State of Texas under the name American
Asset Advisers, Inc. (herein sometimes referred to as "American"),
collectively referred to herein as the "Venturers" and individually
referred to herein as "Venturer".
W I T N E S S E T H:
WHEREAS, the Venturers have agreed and do hereby agree to form
a joint venture under the laws of the State of Texas for the
purpose of acquiring, owning, leasing, maintaining, operating,
repairing, improving, and otherwise using and dealing with the real
property, together with the improvements thereon, described on
Exhibit A attached hereto and made a part hereof (the "Property");
NOW, THEREFORE, for and in consideration of the premises, the
Venturers do hereby covenant and agree, each with the other, as
follows:
ARTICLE 1
FORMATION OF JOINT VENTURE
1.1 The Venturers hereby enter into and form a joint venture
(the "Joint Venture") under the laws of the State of Texas for the
limited purposes herein set forth and upon the terms and provisions
set out herein.
1.2 The name of the Joint Venture shall be "AAA Joint Venture
96-1".
1.3 The Venturers shall execute all assumed and fictitious
name certificates and take all other action required by law to
comply with the Texas Revised Partnership Act and the assumed name
act, fictitious name act or similar statute in effect in each
jurisdiction or political subdivision in which the Joint Venture
proposes to do business. Furthermore, the Venturers shall execute
such other documents or supplements to this Agreement as may be
necessary to more fully express the intent and desire of the
Venturers with respect to the Joint Venture.
1.4 The business and purpose of the Joint Venture shall be
limited strictly to (i) acquiring, owning, leasing, maintaining,
operating, repairing, improving, and otherwise using and dealing
with the Property for profit; and (ii) engaging in any and all
activities related or incident to the foregoing business and
purpose, including, without limitation, the acquisition, ownership,
improvement, sale, lease, mortgage, hypothecation, encumbrance or
other use of or dealing with all types and kinds of property,
whether real, personal or mixed property.
1.5 The principal office of the Joint Venture shall be Eight
Greenway Plaza, Suite 824, Houston, Texas 77046.
ARTICLE 2
TERM
2.1 The terms of the Joint Venture shall be for a period of
twenty (20) years commencing on the date hereof, unless otherwise
agreed by the Venturers. The foregoing sentence notwithstanding,
the Joint Venture shall terminate upon the sale of all property
owned by the Joint Venture.
ARTICLE 3
DISTRIBUTIVE SHARES OF VENTURE
3.1 The distributive shares of the Venturers in the Joint
Venture are as follows:
Venturer Distributive Share
AAA X 18.25%
AAA XI 29.85%
American 51.90%
TOTAL: 100.00%
3.2 The distributive share (the "Distributive Share") of each
Venturer is the degree of ownership, expressed as a percentage,
which determines, among other things, the extent to which the
Venturer shall share in Joint Venture profits and surplus, and bear
Joint Venture expenses, losses and liabilities.
ARTICLE 4
OTHER PROVISIONS
4.1 In the event of a proposed sale of property held in the
Joint Venture by one of the Venturers, the other Venturer shall
have the right to purchase the other Venturer's interest. The sale
price of a Venturer's interest shall be the fair market value of
the property multiplied by the Distributive Share of the purchasing
Venturer. In the event that the Venturers are unable to agree upon
the fair market value of the property, the Venturers shall agree
upon and appoint an appraiser to determine the fair market value of
the property. The fair market value of the property as determined
by the appraiser shall be binding on both parties. Each Venturer
shall pay the amount of the appraiser's fee equal to the total fee
multiplied by the Venturer's Distributive Share.
4.2 Except as otherwise provided herein, the rights and
liabilities of the Venturers and the relations of the Venturers
shall be set forth in or provided under the Texas Revised
Partnership Act (Vernon's Ann.Civ.St. art. 6132b-1.01 et seq.), as
amended.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the dates of the respective acknowledgments
hereinbelow, to be effective as the day and in the year first above
written.
AAA NET REALTY FUND X, LTD., a Ne-
braska limited partnership
By: AMERICAN ASSET ADVISERS MANAGE-
MENT CORP. X, its Managing Gen-
eral Partner
By: /s/ H. Kerr Taylor
H. Kerr Taylor, President
AAA NET REALTY FUND XI, LTD., a
Texas limited partnership
By: AMERICAN ASSET ADVISERS MANAGE-
MENT CORP. XI, its Managing
General Partner
By: /s/ H. Kerr Taylor
H. Kerr Taylor, President
AMERICAN ASSET ADVISERS TRUST, INC.,
a Maryland corporation
By: /s/ H. Kerr Taylor
H. Kerr Taylor, President
THE STATE OF TEXAS )
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 24th day of
April, 1996, by H. Kerr Taylor, as President of American Asset
Advisers Management Corp. X, a Nebraska corporation, Managing
General Partner of AAA Net Realty Fund X, Ltd., a Nebraska limited
partnership, on behalf of said corporation and limited partnership.
/s/ Traci Parker Barrientos
Notary Public, State of Texas
My Commission Expires: Notary's Name Printed or Typed:
July 20, 1996 _______________________________
THE STATE OF TEXAS )
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 24th day of
April, 1996, by H. Kerr Taylor, as President of American Asset
Advisers Management Corp. XI, a Texas corporation, Managing General
Partner of AAA Net Realty Fund XI, Ltd., a Texas limited
partnership, on behalf of said corporation and limited partnership.
/s/ Traci Parker Barrientos
Notary Public, State of Texas
My Commission Expires: Notary's Name Printed or Typed:
July 20, 1996 _______________________________
THE STATE OF TEXAS )
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 24th day of
April, 1996, by H. Kerr Taylor, as President of American Asset
Advisers Trust, Inc., a Maryland corporation, on behalf of said
corporation.
/s/ Traci Parker Barrientos
Notary Public, State of Texas
My Commission Expires: Notary's Name Printed or Typed:
July 20, 1996 _______________________________
EXHIBIT "A"
LEGAL DESCRIPTION
All that part of the Northeast Quarter of the Northeast Quarter of Section
23, Township 13 South, Range 13 East, of the Gila and Salt River Base and
Meridian, Pima County, Arizona, described as follows:
COMMENCING at the point of intersection of the North line of said Section
23 with the West right-of-way line of the Tucson-Oracle Jct.-Globe Highway,
Project No. F031-1-807, which right-of-way line is parallel with and 100
feet Westerly from the survey center lines, which center line crosses said
North line of Section 23 North 88 degrees 37 minutes 50 seconds West
(record), North 89 degrees 27 minutes 15 seconds West (measured) 7.60 feet
from the Northeast corner of said Section 23;
THENCE South 00 degrees 24 minutes 30 seconds East (record), South 00
degrees 33 minutes 57 seconds East (measured), along said West right-of-way
line, 45.75 feet to the TRUE POINT OF BEGINNING;
THENCE continuing South 00 degrees 24 minutes 30 seconds East (record),
South 00 degrees 33 minutes 57 seconds East (measured), along said West
right-of-way line 506.37 feet (record), 504.94 feet (measured) to its
intersection with a line parallel with and 30 feet Easterly from the center
line of Old Oracle Road as determined by the center line of the existing
concrete pavement;
THENCE North 44 degrees 02 minutes 25 seconds West (record), North 44
degrees 11 minutes 51 seconds West (measured), along said parallel line
439.53 feet (record), 439.08 feet (measured, to a point of curve);
THENCE Northwesterly along the arc of a 290.62 foot radius curve to the
right in said parallel line, thru a central angle of 52 degrees 35 minutes
25 seconds (record), 51 degrees 29 minutes 28 seconds (measured), 266.75
feet (record), 261.18 feet (measured), to a point in the North line of said
Section 23, which point is North 88 degrees 37 minutes 50 seconds West
(record), North 89 degrees 27 minutes 15 seconds West (measured), along said
North line 487.85 feet from the Northeast corner of said Section 23;
THENCE South 88 degrees 37 minutes 50 seconds East (record), South 89
degrees 27 minutes 15 seconds East (measured), East along said North line
124.79 feet (record), 125.49 feet (measured);
THENCE South 78 degrees 32 minutes 02 seconds East (record), South 79
degrees 19 minutes 24 seconds East (measured), 260.87 feet (record), 260.04
feet (measured) to the TRUE POINT OF BEGINNING.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 193,466
<SECURITIES> 0
<RECEIVABLES> 195
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 193,661
<PP&E> 7,937,234
<DEPRECIATION> 400,416
<TOTAL-ASSETS> 9,878,759
<CURRENT-LIABILITIES> 1,409
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,865,350
<TOTAL-LIABILITY-AND-EQUITY> 9,878,759
<SALES> 1,011,429
<TOTAL-REVENUES> 1,036,911
<CGS> 0
<TOTAL-COSTS> 299,699
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 737,212
<INCOME-TAX> 0
<INCOME-CONTINUING> 737,212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 737,212
<EPS-PRIMARY> 64.36
<EPS-DILUTED> 0
</TABLE>
